TPA’s cannot convert revenue-code-only bills to Medicare yet they do. How in the world do they do that?
How Do Reference Based Pricing Plans Apply Medicare Claim Benchmarking When Hospitals Submit “Revenue-Code-Only” Bills
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Hospitals often issue “revenue-code-only” bills when billing non-Medicare payers, submitting to TPAs without DRG capability, or billing per diem, percent-of-charges, or case rate contracts. TPA’s cannot convert revenue-code-only bills to Medicare because revenue codes alone won’t suffice. TPAs need additional information which hospitals can provide.
Step 2: Assign the MS-DRG using a certified DRG grouper
Step 2 is the formal DRG grouping step: the TPA runs the hospital’s clinical codes through a CMS-certified grouper to assign a defensible MS-DRG and relative weight.
Once the TPA receives the missing clinical data from the hospital, this is what happens operationally.
A. Validate the data
The TPA (or its DRG vendor) checks that the hospital supplied:
- Principal ICD-10-CM diagnosis
- Secondary diagnoses (with CC/MCC potential)
- ICD-10-PCS procedure codes (if surgical)
- Patient age and sex
- Discharge disposition
- POA indicators (if available)
If anything is missing or inconsistent, the claim pauses again.
B. Run the claim through a CMS-certified grouper
The TPA uses one of the following:
- CMS MS-DRG Grouper (gold standard)
- 3M / Optum / TruCode (commercial implementations of CMS logic)
The grouper:
- Determines medical vs surgical DRG
- Identifies MCC / CC
- Assigns the final MS-DRG
- Outputs the relative weight
This step mirrors exactly how Medicare would group the case.
C. Lock the DRG (important for disputes)
Once assigned:
- The DRG becomes the payment anchor
- Any appeal or audit must address coding accuracy, not revenue codes or charges
This protects the plan in:
- ERISA disputes
- Balance billing challenges
- “You guessed the DRG” hospital arguments
D. Document the methodology
TPAs retain:
- Grouper version used
- Input diagnosis/procedure codes
- Date of grouping
- DRG output
This documentation is critical for defensibility.
How Step 2 feeds Step 3
Once the MS-DRG is assigned, the TPA can:
- Calculate Medicare allowed amount
- Apply RBP percentage (e.g., 140% of Medicare)
- Proceed to payment and EOB issuance
